May 26, 2009

Tax time

Tax time is now officially passed and you've had a
month to recover from the assault on your bank account and senses. So,
it is time to kick back and relax now, right? Nope. You should be
getting your act together when it comes to your taxes for next year.

I
am not going to harangue you about getting organized for your 2010
taxes. I am a human being as well. I fully recognize the last thing
anyone wants to do at this point is worry about taxes for next year.
No, I am talking about something else in regard to getting your act
together for 2010 - tax planning.

Financial planners promise you
the sun when it comes to investments. Well, we've all seen how that has
been working out lately. While few people have made money on
investments lately, there is another way to make money in general. You
can cut your expenses. What is one of your biggest expenses? Taxes!

Mention
tax planning and people often get visions of exotic offshore
destinations the rich use to hide money. The picture of Richard Branson
water skiing with a nude super model on his back comes to mind. While
such scenarios exist, they are not what I am discussing. Instead, I am
talking about simple tax planning that can save you a bundle. Let's
look at an example.

After eating breakfast, I pop the dishes in
the dishwasher and turn it on. I head out into the garage to work on
something. A nasty smell reaches me. I come back in to find soapy water
all over the floor and smoke coming from the dishwasher. Crikey! I need
a new dishwasher. I head off to the local appliance store and end up
buying a dishwasher that slices, dices and predicts the future. It
costs me $900.

So, what does my new dishwasher have to do with
taxes? I just missed a big tax savings. If I had purchased an Energy
Star certified dishwasher, I would've been able to claim a tax credit
of $300 or so. "Energy Star" is a certification that a device is energy
efficient, which the government is promoting. Now keep in mind this is
a tax CREDIT. Tax credits are incredibly valuable. They are not
deducted from your gross income. Instead, you figure out what you owe
Uncle Sam and then deduct the tax credit from that amount. Yep, a
dollar for dollar deduction.

This is only one example, but it
shows you how a bit of tax planning can make a world of difference in
what you pay in next year. Hiring a proactive accountant is really a
good move. They can create a strategy for you to use losses, deductions
and tax credits to wipe out your tax bill. You can even write off their
fees. Now that is tax planning for the regular guy - you and me!